2018 in Review: Wall Street Titans Showing Up to the Crypto Party
Wall Street is home to numerous investment banks, brokerage houses and financial institutions. Having been in the spotlight all along, Wall Street giants usually tread cautiously when it comes to cryptocurrencies, as every move they make is bound to be watched closely by the entire world.
Major crypto assets experienced colossal dumps over the past year. The price of the most dominant crypto plunged some 80% from its all-time high of about $20,000 at the end of 2017.
Investors squealed when the crypto crash was at its worst, yet a number of Wall Street financial institutions were still eager to get their foot in the door of the space.
Wall Street Meets Crypto
What will happen to the crypto market when traditional financial centers meet top emerging technologies?
Wall Street has made one thing clear. It is not being hasty about the crypto gold rush, for the sake of regulation and reputation. Yet these global financial giants are getting ready to pounce when the crypto-related regulatory framework finally takes shape.
Early movers in the space usually enjoy an upside potential by capturing market share and reaping massive benefits.
Though speculation surrounding Wall Street’s entry into the crypto space still remains at the heart of the market, some top investment banks seem to be well positioned to serve clients attracted to cryptos.
Jamie Dimon, CEO of Wall Street banking titan JPMorgan, once said that Bitcoin is a fraud and “worse than tulip bulbs.” Bitcoin’s value slid 6% after his comments. He also threatened to fire any employees trading Bitcoin.
Interestingly, JPMorgan’s ongoing crypto initiatives seem to run counter to what Dimon said. As early as May, 2018, Oliver Harris was appointed as Head of Crypto Assets Strategy to spearhead new crypto projects for the bank.
The bank now boasts two teams dedicated to cryptocurrencies—one focusing on blockchain technology and the other on crypto strategies.
It’s reported that JPMorgan was already technically prepared for Bitcoin swap trading. The new service is expected to be released any time to meet the demand from institutional clients.
As the world’s largest asset manager, BlackRock has taken the lead in venturing into crypto land. Back in July, 2018, the firm announced its plans to set up a working group to explore blockchain technology and crypto assets.
BlackRock’s entry not only boosted investor confidence in such a dubious crypto market, but also served as a catalyst for upward price movement, as Bitcoin extended gains on that day.
Back in early August, 2018, Goldman Sachs shifted its focus to custody products for crypto funds, which may serve as a tailwind previously overlooked by the market.
Goldman Sachs was reportedly considering scrapping its plans for a digital currency trading desk, but instead of ditching them once and for all, it may revive these crypto trading plans later when the time is right.
The renowned financial giant, spearheaded by new CEO David Solomon, is also working on Bitcoin derivatives known as non-deliverable forwards (NDF).
Back in August, Intercontinental Exchange (ICE) announced the creation of Bakkt—a crypto trading platform that leverages Microsoft’s cloud.
As ICE serves as the operator of the New York Stock Exchange, the upcoming launch of the widely accepted Bakkt Bitcoin futures has gained considerable market attention. The launch of Bitcoin futures, rescheduled for January 24 of 2019, is expected to get the regulatory nod of approval soon, according to latest media reports.
Unlike cash-settled Bitcoin futures on CME and CBOE, Bakkt daily Bitcoin futures contracts are settled physically. Many investors and institutions are holding bullish views on the matter.
Following in the footsteps of Goldman Sachs, Citigroup, the U.S.-based investment banking giant, reportedly rolled out its own custodian solution—called digital asset receipts (DARs)—for crypto land in September, 2018.
DARs work in much the same way as American depository receipts (ADRs), enabling investment in cryptocurrencies without the need to personally manage the digital assets. Citigroup’s new move could exert a huge impact on the market and make the company a game changer in the crypto industry.
Morgan Stanley, the world’s sixth largest bank, joined Citigroup and Goldman Sachs to offer crypto options for its clients in September, 2018.
The investment bank is building a derivatives product that will give traders synthetic exposure to the performance of the world’s largest cryptocurrency. Investors will be able to go either long or short using so-called price return swaps, while Morgan Stanley charges a spread for each transaction.
Fidelity Investments is one of the world’s leading investment and asset management companies. The $2.5tn Wall Street giant is diving into crypto land with a brand new digital assets arm called Fidelity Digital Assets, focusing on bringing cryptos to institutional investors.
Fidelity Digital Assets will provide custody services for Bitcoin, Ether and other digital assets.
Yaniv Feldman, CEO and Founder of One Alpha, talked about Fidelity’s involvement in crypto land during an interview on CNBC’s Crypto Trader. According to Mr Feldman, the launch of Fidelity Digital Assets is one of the most significant things that occurred in 2018, as the crypto market has been eagerly waiting for the emergence of a big shot like Fidelity.
Nasdaq is still mulling over whether to launch Bitcoin futures in the first quarter of 2019, in spite of the enduring crypto slump.
As early as last November, when Bitcoin first pushed above $11,000 to an unprecedented high, Nasdaq was first reported to be contemplating the launch of Bitcoin futures. If the launch materializes, Nasdaq will become the third U.S. exchange to enter the crypto space, following the Chicago Mercantile Exchange (CME) and Cboe Global Markets.
Nasdaq is partnering with VanEck—a New York-based investment management firm—to bring more financial products to the crypto market.
In addition, Nasdaq and Fidelity also invested heavily in new Wall Street-backed crypto exchange ErisX.
ErisX is gearing up for Bitcoin, Litecoin and Ether spot and futures trading starting this year, contingent on regulatory approval.
In 2017, there was a debate brewing in the market over whether the tulip mania analogy was an apt description for Bitcoin, while Wall Street simply shifted its focus on Bitcoin investment strategy last year. No one knows what’s going to happen next, but one thing is clear—Bitcoin is badly in need of capital inflows.
With the world's largest pool of wealth at its fingertips, Wall Street financial institutions entering the space will bring in a lot of new money and offer the best chance of crypto products and services getting mass adoption.
As there is a plethora of opportunities ahead for traditional financial centers, more and more Wall Street titans are expected to set their sights on the crypto space in the days to come.